Module 14: Taxation and Regulation (US and EU Edition)
United States: Reporting and Form 1099-DA
Chapter 6 of 12 · about 5 minutes
6.1 The form in the mailbox
In early 2026, Node received a new tax form from a crypto exchange: Form 1099-DA. It listed the proceeds from every sale Node had made on the exchange in 2025. The cost basis column was empty.
"It says I received $84,000 from sales," said Node. "But it doesn't say what I paid. Will the IRS think all of that is profit?"
"Not if you report your cost basis correctly on your return," said Hash. "But the IRS now gets a copy of that form. If your return doesn't line up with it, expect questions."
6.2 The digital asset question
Every individual US federal income tax return (Form 1040) includes a question asking whether, during the year, you received digital assets as a reward, award, or payment, or sold, exchanged, or otherwise disposed of digital assets.
| If you only | Typical answer |
|---|---|
| Bought and held crypto with dollars | No, generally |
| Moved crypto between your own wallets | No, generally |
| Sold, swapped, spent, or received crypto as income | Yes |
Answer it accurately. Check the current year's instructions, since wording can change.
6.3 Where crypto goes on the return
| Activity | Main forms (general) |
|---|---|
| Capital gains and losses from disposals | Form 8949, which lists each disposal, summarised on Schedule D |
| Staking, airdrop, and other non-business income | Generally Schedule 1, as other income |
| Mining or crypto activity as a business | Schedule C, with self-employment tax on Schedule SE |
| Wages paid in crypto | Reported like other wages |
Form 8949 includes categories for transactions reported on Form 1099-DA, with or without basis reported, and for digital asset transactions not reported on any form. Crypto tax software (Chapter 3) usually produces Form 8949 directly.
6.4 Form 1099-DA
Form 1099-DA, Digital Asset Proceeds From Broker Transactions, is a tax form that crypto brokers file with the IRS and send to customers. It was created to bring crypto reporting closer to the way stock brokers report on Form 1099-B.
| Tax year | What brokers report | Form sent to customers |
|---|---|---|
| 2025 | Gross proceeds from sales | Early 2026 |
| 2026 onwards | Gross proceeds, plus cost basis for covered assets | Early 2027 onwards |
Covered assets are generally those acquired on or after 1 January 2026 in an account at the same broker, where the broker knows the cost. Assets acquired earlier, or transferred in from elsewhere, are generally noncovered: the broker reports proceeds but may leave basis blank.
Who issues it? Custodial brokers, such as centralised exchanges and certain custodial platforms. A separate rule that would have required many DeFi front ends to report as brokers was repealed by Congress in April 2025.
Chapter 6 · Form 1099-DA reporting
A broker files Form 1099-DA with the IRS and sends a copy to the customer, with proceeds filled in but cost basis often blank for noncovered assets. The taxpayer reconciles each disposal on Form 8949 and Schedule D using their own records, and remains responsible for reporting DeFi and self-custody activity the broker never saw.
6.5 What Form 1099-DA means for you
| Situation | What to do |
|---|---|
| Form shows proceeds but no basis | Report your correct basis on Form 8949 from your own records |
| Form shows basis that's wrong | Report the correct basis on Form 8949 and keep records to support it |
| You transferred assets in from another wallet | The broker likely doesn't know your basis; you must supply it |
| You used several brokers | Expect a separate form from each |
| Activity on DeFi or self-custody | Not covered by Form 1099-DA, but still reportable by you |
Example. Node's Form 1099-DA shows $84,000 of proceeds and no basis. If Node's own records show the coins sold originally cost $70,000, the gain reported on Form 8949 is $84,000 − $70,000 = $14,000, not $84,000. Without those records, the full $84,000 could be mistaken for profit.
"So the form doesn't calculate my tax," said Node. "It tells the IRS what to look for."
"Exactly," said Hash. "Your job is to report accurately and be able to explain any differences."
6.6 Other forms you might receive
Some platforms issue other information forms, for example for staking rewards or other income. Payment processors may issue forms for payments received. As with Form 1099-DA, the absence of a form doesn't mean income isn't taxable.
6.7 Foreign platforms and accounts
US taxpayers with accounts at foreign financial institutions may have additional reporting obligations for foreign accounts and assets. How these rules apply to crypto held on foreign exchanges has been evolving and depends on specific facts. If you hold crypto on platforms outside the US, ask a tax professional whether foreign account or foreign asset reporting applies to you.
6.8 State returns
Most states with income taxes follow federal treatment of crypto gains, but rates and some rules differ. Some states have no income tax. Check your state's requirements.
6.9 Mistakes and corrections
If you discover an error on a past return, such as unreported crypto gains or income, it's generally better to correct it through an amended return than to wait for the IRS to find it. Penalties and interest typically increase the longer issues remain unaddressed. A tax professional can advise on the best approach, especially for multiple years.
Pending legislation in 2026 included a proposed programme to help taxpayers correct past crypto reporting (Chapter 5). Check whether anything like this has been enacted.
6.10 Try it yourself
Download any Form 1099-DA or other tax forms from every exchange you used. Compare the proceeds with your own records. Identify which sales show basis, which don't, and which transfers in might be missing basis. Then check whether your tax software or professional has matched each sale correctly.
Key takeaways from this chapter
- Every US individual return asks whether you received or disposed of digital assets; answer accurately.
- Disposals go on Form 8949 and Schedule D; income generally goes on Schedule 1 or, for businesses, Schedule C.
- Form 1099-DA reports gross proceeds for 2025 sales, and adds cost basis for covered assets from tax year 2026.
- Assets acquired before 2026 or transferred in are generally noncovered; you must supply their basis.
- Custodial brokers issue Form 1099-DA; a DeFi-specific broker rule was repealed in 2025, but DeFi activity is still reportable by you.
- Foreign platform reporting obligations depend on facts and have been evolving; seek professional advice.
- Correct past errors proactively, and check state requirements.